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When Social Responsibility Turns Bad!

by Bob Herbold May 4, 2012

A few years ago, when BP/Deepwater Horizon spilled millions of gallons of oil off the Gulf coast, Procter & Gamble contributed thousands of cases of Dawn Dishwashing Detergent to help workers clean oil off birds impacted by that tragic event. Dawn, P&G, and P&G shareholders got a win since the news mentioned Dawn’s superior grease cleaning power, while being safe for the birds, and it was a relative modest expenditure by Dawn. The birds and the workers sure got a win as well, as did the community’s budget and reputation.

We talked about PepsiCo in this blog last week, but I can’t resist citing a social responsibility example from that company. Specifically, Business Week noted recently Pepsi spent an eye-popping $100 million on the “Pepsi Refresh Project,” a heavily digital campaign where people compete to win grants for community endeavors – everything from building animal rescue shelters to buying new instruments for a high school marching band. It seems that the huge spending behind this effort, as well as Pepsi’s large but struggling push into “good-for-you” food, were likely funded by Pepsi’s large decrease in its beverage marketing budget.

As the business press has pointed out, PepsiCo’s big pullback in beverage marketing, which analysts note will require hundreds of millions of dollars to restore to levels of a few years ago, was undoubtedly the key factor that enabled Diet Coke to overtake Regular Pepsi and gain the #2 market share position ( Regular Coke holds the #1 position). I am sure there are some high school bands that are very happy about the whole thing, but shareholders are not happy; in the last two years, PepsiCo’s share price has been flat while Coke went up 40%.

Courageous leaders know that companies exist to serve shareholders while also being good corporate citizens. They don’t allow social responsibility projects to get out of control and punish shareholders, but they also don’t allow social responsibility to be ignored.